Export expert: Selling farm tires in Latin America involves taking risks, flexibility
Taking chances is second nature for Jose Rios, director of Lucy’s Tire Inc., a wholesaler based near Miami, Fla. Rios has spent the last 20 years pursuing risky business opportunities. Along the way, he’s built Lucy’s Tires into one of America’s biggest exporters of tires to Central and South America with annual sales of $51 million.
Twenty-two years ago, Rios and his wife and company namesake, Lucy, took the first of many big chances by emigrating from Venezuela to the United States and buying a small retail tire shop near Miami called Melissa Tire. They re-named it Lucy’s Tire, and began selling passenger and light truck tires.
At the same time, they were shipping tires back to Venezuela, where Lucy’s parents ran a tire dealership called Diorca Tire.
The wholesale end of their business began to grow “because Diorca needed different sources in the States.” In 1988, the couple decided to exit retail and focus on exports.
One year later, the Venezuelan government turned off the flow of imports into the country. Sitting on $50,000 in merchandise, Rios and his wife suddenly found themselves with no customers.
“I said, ‘Lucy, I’m going to take my briefcase and visit other countries and see what we can do.’”
He flew to Guatemala, sight unseen. “I didn’t know anybody. I didn’t know the market. I didn’t know anybody who could tell me where to go.”
Rios began knocking on doors. He found a tire dealer who ordered $10,000 in tires from him.
Emboldened, Rios continued to pound the pavement, looking for dealers who were unhappy with their current suppliers or were looking for items that were hard to obtain in Latin America.
“We finished the year with close to $500,000 in sales. In those countries you have factories for passenger tires, but farm tires are not easy to get. Those customers needed a supplier of farm tires.”
Meanwhile, customers began asking for different products like passenger, medium truck and industrial tires. Rios obliged, and soon Lucy’s Tire started shipping custom mixed containers. Business picked up.
“We try to be fair with our customers. They appreciate an honest business. The market has ups and downs all the time. If you try to be too greedy, your customers remember.”
Working out of a 150,000-square-foot warehouse near Miami, Lucy’s Tire currently exports to 18 Latin American countries, including Chile, Argentina, Bolivia, Peru, Nicaragua, Ecuador and others. Farm tires remain the company’s main offering.
Its main farm tire brand is Firestone, but it also sells Goodyear and Titan ag tires.
For the most part, the farm economy south of the equator has been healthy, says Rios. South America, in particular, has emerged as a fertile market for second-hand equipment filtered down from the U.S.
“Fleets in the majority of those countries are very old… lots of two-wheel-drive tractors. Central and South America are still 10 years behind U.S. technology in tractors and other equipment.”
But the desire to upgrade farm equipment is strong. “That’s one of our advantages: We have the OE tires for replacement.”
In addition, farmers are willing to pay more money for name brand tires, he adds.
The biggest obstacle to doing business in Latin America is the region’s volatile political situation, he reports. The Venezuelan bolivar has plummeted in value by 30% this year under President Hugo Chavez, while inflation has skyrocketed into the mid-teens.
Lucy’s Tire used to sell $10 million a year in merchandise to customers in Venezuela. That figure has fallen to $4 million.
“You have to understand these countries’ governments in order to do business with them,” says Rios. “One year you can be in glory with them and the next year a new president comes in and changes all the rules. That’s why we spread the risk. You can’t lead with one country or five countries.”
Because of turmoil in Venezuela, he says his company’s sales in 2007 will probably remain on par with 2006 levels. “We know Venezuela is bad, so we have to put more emphasis on the other countries.”
This may present another risk, but if anyone can adapt, it’s Jose Rios.